I did some research and looks like the FAT table flash wear out is very possible...
http://ej.iop.org/links/rSET_iM8K/Dh...nf6_48_248.pdf

Unless there is some built in wear out mechanism, the flash can easily wear out if the FAT table is updated frequently, such as when using Maemo Mapper.

Anybody have any more insight? Do (some/all?) SD cards have this wear out (load balancing) mechanism built in hardware, or is it the responsibility of SD card controller? Does N800 memory card controller has such code?